Transmission Relay Loadability Reliability Standard, 16914-16956 [2010-6568]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 75, Number 63 (Friday, April 2, 2010)]
[Rules and Regulations]
[Pages 16914-16956]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-6568]



[[Page 16913]]

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Part II





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Part 40



Transmission Relay Loadability Reliability Standard; Final Rule

Federal Register / Vol. 75 , No. 63 / Friday, April 2, 2010 / Rules 
and Regulations

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 40

[Docket No. RM08-13-000; Order No. 733]


Transmission Relay Loadability Reliability Standard

March 18, 2010.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: Pursuant to section 215 of the Federal Power Act, the Federal 
Energy Regulatory Commission approves the Transmission Relay 
Loadability Reliability Standard (PRC-023-1), developed by the North 
American Electric Reliability Corporation (NERC). Reliability Standard 
PRC-023-1 requires transmission owners, generator owners, and 
distribution providers to set load-responsive phase protection relays 
according to specific criteria in order to ensure that the relays 
reliably detect and protect the electric network from all fault 
conditions, but do not limit transmission loadability or interfere with 
system operators' ability to protect system reliability. In addition, 
pursuant to section 215(d)(5) of the Federal Power Act, the Commission 
directs NERC to develop modifications to the Reliability Standard to 
address specific concerns identified by the Commission.

DATES: Effective Date: This rule will become effective May 17, 2010.

FOR FURTHER INFORMATION CONTACT:
Cynthia Pointer (Technical Information), Office of Electric 
Reliability, Division of Reliability Standards, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426. 
(202) 502-6069.
Joshua Konecni (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426. (202) 502-6291.

SUPPLEMENTARY INFORMATION:

                            Table of Contents
 
                                                               Paragraph
                                                                 Nos.
 
I. Background...............................................           2
II. Reliability Standard PRC-023-1..........................           5
    A. Applicability........................................           6
    B. Requirements.........................................           8
        1. Requirement R1...................................           9
        2. Requirement R2...................................          10
        3. Requirement R3...................................          11
III. Discussion.............................................          12
    A. Overview.............................................          12
    B. Approval of PRC-023-1................................          13
    C. Applicability........................................          20
    D. Generator Step-Up and Auxiliary Transformers.........          98
        1. Omission From the Reliability Standard...........          98
        2. Generator Step-Up Transformer Relays as Back-up           109
         Protection.........................................
    E. Need to Address Additional Issues....................         115
        1. Zone 3/Zone 2 Relays Applied as Remote Circuit            116
         Breaker Failure and Backup Protection..............
        2. Protective Relays Operating Unnecessarily due to          130
         Stable Power Swings................................
    F. Requirement R1.......................................         174
        1. Sub-Requirement R1.1.............................         175
        2. Sub-Requirement R1.2.............................         178
        3. Sub-Requirement R1.10............................         190
        4. Sub-Requirement R1.12............................         213
    G. Requirement R2.......................................         227
    H. Requirement R3 and Its Sub-Requirements..............         230
        1. Role of the Planning Coordinator.................         231
        2. Sub-Requirement R3.3.............................         235
    I. Attachment A.........................................         238
        1. Section 2: Evaluation of Out-of-Step Blocking             239
         Schemes............................................
        2. Section 3: Protection Systems Excluded from the           249
         Reliability Standard...............................
    J. Effective Date.......................................         273
    K. Violation Risk Factors...............................         285
    L. Violation Severity Levels............................         298
    M. Miscellaneous........................................         313
        1. Purpose of the Reliability Standard..............         313
        2. Transmission Facility Design Margin..............         316
IV. Information Collection Statement........................         318
V. Environmental Analysis...................................         329
VI. Regulatory Flexibility Act..............................         330
VII. Document Availability..................................         345
VIII. Effective Date and Congressional Notification.........         348
 

Before Commissioners: Jon Wellinghoff, Chairman; Marc Spitzer, 
Philip D. Moeller, and John R. Norris.

    1. Pursuant to section 215 of the Federal Power Act (FPA),\1\ the 
Commission approves the Transmission Relay Loadability Reliability 
Standard (PRC-023-1), developed by the North American Electric 
Reliability Corporation (NERC) in its capacity as the Electric 
Reliability Organization

[[Page 16915]]

(ERO).\2\ Reliability Standard PRC-023-1 requires transmission owners, 
generator owners, and distribution providers to set load-responsive 
phase protection relays according to specific criteria in order to 
ensure that the relays reliably detect and protect the electric network 
from all fault conditions, but do not limit transmission loadability or 
interfere with system operators' ability to protect system 
reliability.\3\ In addition, pursuant to section 215(d)(5) of the 
FPA,\4\ the Commission directs the ERO to develop modifications to PRC-
023-1 to address specific concerns identified by the Commission and 
sets specific deadlines for these modifications.
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    \1\ 16 U.S.C. 824o. The Commission is not adding any new or 
modified text to its regulations.
    \2\ Section 215(e)(3) of the FPA directs the Commission to 
certify an ERO to develop mandatory and enforceable Reliability 
Standards, subject to Commission review and approval. 16 U.S.C. 
824o(e)(3). Following a selection process, the Commission selected 
and certified NERC as the ERO. North American Electric Reliability 
Corp., 116 FERC ] 61,062 (ERO Certification Order), order on reh'g & 
compliance, 117 FERC ] 61,126 (ERO Rehearing Order) (2006), aff'd 
sub nom. Alcoa, Inc. v. FERC, 564 F.3d 1342 (DC Cir. 2009).
    \3\ Loadability refers to the ability of protective relays to 
refrain from operating under load conditions.
    \4\ 16 U.S.C. 824o(d)(5).
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I. Background

    2. Protective relays are devices that detect and initiate the 
removal of faults on an electric system.\5\ They are designed to read 
electrical measurements, such as current, voltage, and frequency, and 
can be set to recognize certain measurements as indicating a fault. 
When a protective relay detects a fault on an element of the system 
under its protection, it sends a signal to an interrupting device(s) 
(such as a circuit breaker) to disconnect the element from the rest of 
the system.\6\ Impedance relays (also known as distance relays) are the 
most common type of load-responsive phase protection relays used to 
protect transmission lines. Impedance relays can also provide backup 
protection and protection against remote circuit breaker failure.
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    \5\ Protective relays are one type of equipment used in 
protection systems. The NERC definition of protection systems also 
includes communication systems associated with protective relays, 
voltage and current sensing devices, station batteries, and DC 
control circuitry. See NERC Glossary of Terms Used in Reliability 
Standards at 14.
    \6\ Coordination of protection through distance settings and 
time delays ensures that the relay closest to a fault operates 
before a relay farther away from the fault, thereby ensuring that 
the more distant relay does not disconnect both the transmission 
equipment necessary to remove the fault and ``healthy'' equipment 
that should remain in service.
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    3. Following the August 2003 blackout that affected parts of the 
Midwest and Northeast United States, and Ontario, Canada, NERC and the 
U.S.-Canada Power System Outage Task Force (Task Force) concluded that 
a substantial number of transmission lines disconnected during the 
blackout when load-responsive phase-protection backup distance and 
phase relays operated unnecessarily, i.e. under non-fault conditions. 
Although these relays operated according to their settings, the Task 
Force determined that the operation of these relays for non-fault 
conditions contributed to cascading outages at the start of the 
blackout and accelerated the geographic spread of the cascade.\7\
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    \7\ U.S.-Canada Power System Outage Task Force, Final Report on 
the August 14, 2003 Blackout in the United States and Canada: Causes 
and Recommendations, at 80 (2004) (Final Blackout Report).
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    4. Seeking to prevent or minimize the scope of future blackouts, 
both NERC and the Task Force made recommendations to ensure that these 
types of protective relays do not contribute to future blackouts. 
Recommendation 8A of the NERC Report addresses the need to evaluate 
load-responsive protection zone 3 relays \8\ to determine whether they 
will operate under extreme emergency conditions:

    \8\ Multiple impedance relays are installed at each end of a 
transmission line, with each used to protect a certain percentage, 
or zone, of the local transmission line and remote lines. Zone 3 
relays and zone 2 relays set to operate like zone 3 relays (zone 3/
zone 2 relays) are typically set to reach 100 percent of the 
protected transmission line and more than 100 percent of the longest 
line (including any series elements such as transformers) that 
emanates from the remote buses.

    All transmission owners shall, no later than September 30, 2004, 
evaluate the zone 3 relay settings on all transmission lines 
operating at 230 kV and above for the purpose of verifying that each 
zone 3 relay is not set to trip on load under extreme emergency 
conditions[ ]. In each case that a zone 3 relay is set so as to trip 
on load under extreme conditions, the transmission operator shall 
reset, upgrade, replace, or otherwise mitigate the overreach of 
those relays as soon as possible and on a priority basis, but no 
later than December 31, 2005. Upon completing analysis of its 
application of zone 3 relays, each transmission owner may no later 
than December 31, 2004 submit justification to NERC for applying 
zone 3 relays outside of these recommended parameters. The Planning 
Committee shall review such exceptions to ensure they do not 
increase the risk of widening a cascading failure of the power 
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system.\9\

    \9\ August 14, 2003 Blackout: NERC Actions to Prevent and 
Mitigate the Impacts of Future Cascading Blackouts, at 13 (2004) 
(NERC Report).

Recommendation No. 21A of the Task Force Final Blackout Report (Final 
Blackout Report) urges NERC to expand the scope of its review to 
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include certain operationally significant facilities:

    NERC [should] broaden the review [described in Recommendation 8A 
of the NERC Report] to include operationally significant 115 kV and 
138 kV lines, e.g., lines that are part of monitored flowgates or 
interfaces. Transmission owners should also look for zone 2 relays 
set to operate like zone 3 [relays].\10\
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    \10\ Final Blackout Report at 158.

    In its petition, NERC states that PRC-023-1 is intended to 
specifically address these recommendations.

II. Reliability Standard PRC-023-1

    5. Reliability Standard PRC-023-1 requires transmission owners, 
generator owners, and distribution providers to set load-responsive 
phase protection relays according to specific criteria in order to 
ensure that the relays reliably detect and protect the electric network 
from all fault conditions, but do not operate during non-fault load 
conditions.

A. Applicability

    6. As proposed by NERC, the Reliability Standard applies to relay 
settings on: (1) All transmission lines and transformers with low-
voltage terminals operated or connected at or above 200 kV; \11\ and 
(2) those transmission lines and transformers with low-voltage 
terminals operated or connected between 100 kV and 200 kV \12\ that are 
designated by planning coordinators as critical to the reliability of 
the bulk electric system.\13\
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    \11\ NERC explains in general that it decided to make PRC-023-1 
voltage-level-specific because the definition of what is included in 
the ``bulk electric system'' varies throughout the eight Regional 
Entities and because the effects of PRC-023-1 are not constrained to 
regional boundaries. For example, if one Region has purely 
performance-based criteria and an adjoining Region has voltage-based 
criteria, these criteria may not permit consideration of the effects 
of protective relay operation in one Region upon the behavior of 
facilities in the adjoining Region. NERC Petition at 18-19, 39-41.
    \12\ In this Final Rule, we occasionally use the shorthand ``100 
kV-200 kV facilities'' to refer to transmission lines and 
transformers with low-voltage terminals operated or connected 
between 100 kV and 200 kV.
    \13\ In this Final Rule, we use the terms ``bulk electric 
system'' and ``Bulk-Power System.'' ``Bulk electric system'' is 
defined in the NERC Glossary of Terms Used in Reliability Standards, 
and generally includes facilities operated at voltages at and above 
100 kV. See NERC Glossary of Terms Used in Reliability Standards at 
2. ``Bulk-Power System'' is defined in section 215 of the FPA, and 
does not include a voltage threshold. See 16 U.S.C. 824o(a)(1). In 
Order No. 693, the Commission explained that while it would rely on 
the NERC definition of bulk electric system during the start-up 
phase of the mandatory Reliability Standard regime, the statutory 
Bulk-Power System encompasses more facilities than are included in 
NERC's definition of the bulk electric system. Mandatory Reliability 
Standards for the Bulk-Power System, Order No. 693, FERC Stats. & 
Regs. ] 31,242, at P 75-76; order on reh'g, Order No. 693-A, 120 
FERC ] 61,053 (2007).

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[[Page 16916]]

    7. Attachment A to the Reliability Standard specifies which 
protection systems are subject to and excluded from the Standard's 
Requirements. Section 1 of Attachment A provides that the Reliability 
Standard applies to any protective functions that can operate with or 
without time delay, on load current, including but not limited to: (1) 
Phase distance; (2) out-of-step tripping; (3) switch-on-to-fault; (4) 
overcurrent relays; and (5) communication-aided protection 
applications.\14\ Section 2 states that the Reliability Standard 
requires evaluation of out-of-step blocking schemes \15\ to ensure that 
they do not operate for faults during the loading conditions defined in 
the Standard's Requirements. Finally, section 3 expressly excludes from 
the Reliability Standard's Requirements: (1) Relay elements enabled 
only when other relays or associated systems fail (e.g., overcurrent 
elements enabled only during abnormal system conditions or a loss of 
communications); (2) protection relay systems intended for the 
detection of ground fault conditions or for protection during stable 
power swings; (3) generator protection relays susceptible to load; (4) 
relay elements used only for special protection systems applied and 
approved in accordance with Reliability Standards PRC-012 through PRC-
017; \16\ (5) protection relay systems designed to respond only in time 
periods that allow operators 15 minutes or longer to respond to 
overload conditions; (6) thermal emulation relays used in conjunction 
with dynamic facility ratings; (7) relay elements associated with DC 
line; and (8) relay elements associated with DC converter transformers.
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    \14\ Section 1.5 specifies that the communications aided 
applications subject to the Reliability Standard include, but are 
not limited to: (1) Permissive overreach transfer trip; (2) 
permissive under-reach transfer trip; (3) directional comparison 
blocking; and (4) directional comparison unblocking.
    \15\ ``Out-of-step blocking'' refers to a protection system that 
is capable distinguishing between a fault and a power swing. If a 
power swing is detected, the protection system, ``blocks,'' or 
prevents the tripping of its associated transmission facilities.
    \16\ The Commission has not yet acted on PRC-012-0, PRC-013-0, 
or PRC-014-0 because it is awaiting further information from the 
ERO.
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B. Requirements

    8. Reliability Standard PRC-023-1 consists of three Requirements. 
Requirement R1 directs entities to set their relays according to one of 
the options set forth in sub-requirements R1.1 through R1.13. 
Requirement R2 contains directives for entities that set their relays 
according to sub-requirements R1.6 through R1.9, R1.12, or R1.13. 
Requirement R3 directs planning coordinators to designate which 
facilities operated between 100 kV and 200 kV are critical to the 
reliability of the bulk electric system and therefore must have their 
relays set according to one of the options in Requirement R1.
1. Requirement R1
    9. Requirement R1 directs entities to set their relays according to 
one of thirteen specific settings (sub-requirements R1.1 through R1.13) 
intended to maximize loadability while maintaining Reliable Operation 
of the bulk electric system for all fault conditions. Entities must 
evaluate relay loadability at 0.85 per unit voltage and a power factor 
angle of 30 degrees and set their transmission line relays so that they 
do not operate:

    R1.1. [A]t or below 150 [percent] of the highest seasonal 
[f]acility [r]ating of a circuit, for the available defined loading 
duration nearest 4 hours (expressed in amperes)[;]
    R1.2. [A]t or below 115 [percent] of the highest seasonal 15-
minute [f]acility [r]atingof a circuit (expressed in amperes)[;] 
\17\
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    \17\ NERC includes a footnote that states ``[w]hen a 15-minute 
rating has been calculated and published for use in real-time 
operations, the 15-minute rating can be used to establish the 
loadability requirement for the protective relays.''
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    R1.3. [A]t or below 115 [percent] of the maximum theoretical 
power transfer capability (using a 90-degree angle between the 
sending-end and receiving-end voltages and either reactance or 
complex impedance) of the circuit (expressed in amperes) using one 
of the following to perform the power transfer calculation:
    R1.3.1. An infinite source (zero source impedance) with a 1.00 
per unit bus voltage at each end of the line[;] [or]
    R1.3.2. An impedance at each end of the line, which reflects the 
actual system source impedance with a 1.05 per unit voltage behind 
each source impedance[;]
    R1.4. [O]n series compensated transmission lines[,] * * * at or 
below the maximum power transfer capability of the line, determined 
as the greater of:
    [a.] 115 [percent] of the highest emergency rating of the series 
capacitor[;] [or]
    [b.] 115 [percent] of the maximum power transfer capability of 
the circuit (expressed in amperes), calculated in accordance with 
R1.3, using the full line inductive reactance[;]
    R1.5. [O]n weak source systems[,] * * * at or below 170 
[percent] of the maximum end-of-line three-phase fault magnitude 
(expressed in amperes)[;]
    R1.6. [On] transmission line relays applied on transmission 
lines connected to generation stations remote to load[,] * * * at or 
below 230 [percent] of the aggregated generation nameplate 
capability[;]
    R1.7. [On] transmission line relays applied at the load center 
terminal, remote from generation stations, * * * at or below 115 
[percent] of the maximum current flow from the load to the 
generation source under any system configuration[;]
    R1.8. [On] transmission line relays applied on the bulk system-
end of transmission lines that serve load remote to the system[,] * 
* * at or below 115 [percent] of the maximum current flow from the 
system to the load under any system configuration[;]
    R1.9. [On] transmission line relays applied on the load-end of 
transmission lines that serve load remote to the bulk system[,] * * 
* at or below 115 [percent] of the maximum current flow from the 
load to the system under any system configuration[;]
    R1.10. [On] transformer fault protection relays and transmission 
line relays on transmission lines terminated only with a 
transformer[,] * * * at or below the greater of:
    [a.] 150 [percent] of the applicable maximum transformer 
nameplate rating (expressed in amperes), including the forced cooled 
ratings corresponding to all installed supplemental cooling 
equipment[;] [or]
    [b.] 115 [percent] of the highest operator established emergency 
transformer rating[;]
    R1.11. For transformer overload protection relays that do not 
comply with R1.10[,] [the entity must either]. * * *
    [a.] Set the relays to allow the transformer to be operated at 
an overload level of at least 150 [percent] of the maximum 
applicable nameplate rating, or 115 [percent] of the highest 
operator established emergency transformer rating, whichever is 
greater. The protection must allow this overload for at least 15 
minutes to allow for the operator to take controlled action to 
relieve the overload[;] [or]
    [b.] Install supervision for the relays using either a top oil 
or simulated winding hot spot temperature element. The setting 
should be no less than 100[deg] C for the top oil or 140[deg] C for 
the winding hot spot temperature[;] \18\
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    \18\ NERC includes a footnote that states: ``IEEE [S]tandard 
C57.115, Table 3, specifies that transformers are to be designed to 
withstand a winding hot spot temperature of 180 degrees C, and 
cautions that bubble formation may occur above 140 degrees C.''
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    R1.12. When the desired transmission line capability is limited 
by the requirement to adequately protect the transmission line, set 
the transmission line distance relays to a maximum of 125 [percent] 
of the apparent impedance (at the impedance angle of the 
transmission line) subject to the following constraints:
    R1.12.1. Set the maximum torque angle (MTA) to 90 degrees or the 
highest supported by the manufacturer[;]
    R1.12.2. Evaluate the relay loadability in amperes at the relay 
trip point at 0.85 per unit voltage and a power factor angle of 30 
degrees[;] [and]
    R1.12.3. Include a relay setting component of 87 [percent] of 
the current calculated in R1.12.2 in the [f]acility [r]ating 
determination for the circuit[;]
    R1.13. [Finally,] [w]here other situations present practical 
limitations on circuit capability, [entities can] set the phase

[[Page 16917]]

protection relays so they do not operate at or below 115 [percent] 
of such limitations.
2. Requirement R2
    10. Requirement R2 provides that entities that set their relays 
according to sub-requirements R1.6 through R1.9, R1.12, or R1.13 must 
use the calculated circuit capability as the circuit's facility rating 
and must obtain the agreement of the planning coordinator, transmission 
operator, and reliability coordinator with authority over the facility 
as to the calculated circuit capability.
3. Requirement R3
    11. Requirement R3 directs planning coordinators to designate which 
facilities operated between 100 kV and 200 kV are critical to the 
reliability of the bulk electric system and therefore must have their 
relays set according to one of the options in Requirement R1. Sub-
requirement R3.1 requires planning coordinators to have a process to 
identify critical facilities. Sub-requirement R3.1.1 specifies that the 
process must consider input from adjoining planning coordinators and 
affected reliability coordinators. Sub-requirements R3.2 and R3.3 
require planning coordinators to maintain a list of critical facilities 
and provide it to reliability coordinators, transmission owners, 
generator owners, and distribution providers within 30 days of 
initially establishing it, and 30 days of any subsequent change.

III. Discussion

A. Overview

    12. The Commission approves PRC-023-1, finding that it is just and 
reasonable, not unduly discriminatory or preferential and in the public 
interest. The Commission also directs the ERO to develop modifications 
to PRC-023-1 through its Reliability Standards development process to 
address specific concerns identified by the Commission and sets 
specific deadlines for these modifications. Similar to our approach in 
Order No. 693,\19\ we view such directives as separate from approval, 
consistent with our authority under section 215(d)(5) of the FPA to 
direct the ERO to develop a modification to a Reliability Standard.
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    \19\ See supra n.13.
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B. Approval of PRC-023-1

1. NOPR Proposal
    13. On May 21, 2009, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) proposing to approve PRC-023-1 as mandatory and 
enforceable.\20\ As a separate action, pursuant to section 215(d)(5) of 
the FPA, the Commission proposed to direct certain modifications to the 
Reliability Standard.
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    \20\ Transmission Relay Loadability Reliability Standard, Notice 
of Proposed Rulemaking, 74 FR 35830 (Jul. 21, 2009), FERC Stats. & 
Regs. ] 32,642 (2009) (NOPR).
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2. Comments
    14. While commenters universally support the Commission's proposal 
to approve PRC-023-1,\21\ most commenters oppose the majority of the 
Commission's proposed modifications. Some commenters argue that the 
Commission's proposed modifications violate Order No. 693 because they 
prescribe specific changes that would dictate the content of the 
modified Reliability Standard.
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    \21\ See, e.g., NERC Comments, EEI, TAPS, APPA, NARUC, EPSA, 
Exelon.
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3. Commission Determination
    15. Pursuant to section 215(d)(2) of the FPA,\22\ the Commission 
approves PRC-023-1 as just, reasonable, not unduly discriminatory or 
preferential, and in the public interest. The Commission finds that 
PRC-023-1 is a significant step toward improving the reliability of the 
Bulk-Power System in North America because it requires load-responsive 
phase protection relay settings to provide essential facility 
protection for faults, while allowing the Bulk-Power System to be 
operated in accordance with established facility ratings.
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    \22\ 16 U.S.C. 824o(d)(2).
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    16. Also, pursuant to section 215(d)(5) of the FPA, the Commission 
adopts some of the proposed modifications in the NOPR and thus directs 
certain modifications to the Reliability Standard. Unless stated 
otherwise, the Commission directs the ERO to submit these modifications 
no later than one year from the date of this Final Rule. We will 
address each proposal and the specific comments received on each 
proposal in the remainder of this Final Rule.
    17. With regard to the concerns raised by some commenters about the 
prescriptive nature of the Commission's proposed modifications, we 
agree that, consistent with Order No. 693, a direction for modification 
should not be so overly prescriptive as to preclude the consideration 
of viable alternatives in the ERO's Reliability Standards development 
process. However, some guidance is necessary, as the Commission 
explained in Order No. 693:

    [I]n identifying a specific matter to be addressed in a 
modification * * * it is important that the Commission provide 
sufficient guidance so that the ERO has an understanding of the 
Commission's concerns and an appropriate, but not necessarily 
exclusive, outcome to address those concerns. Without such direction 
and guidance, a Commission proposal to modify a Reliability Standard 
might be so vague that the ERO would not know how to adequately 
respond.\23\
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    \23\ Order No. 693, FERC Stats. & Regs. ] 31,242 at P 185.

    18. Thus, in some instances, while we provide specific details 
regarding the Commission's expectations, we intend by doing so to 
provide useful guidance to assist in the Reliability Standards 
development process, not to impede it. As we explained in Order No. 
693, we find that this is consistent with statutory language that 
authorizes the Commission to order the ERO to submit a modification 
``that addresses a specific matter'' if the Commission considers it 
appropriate to carry out section 215 of the FPA.\24\ In this Final 
Rule, we have considered commenters' concerns and, where a directive 
for modification appears to be determinative of the outcome, the 
Commission provides flexibility by directing the ERO to address the 
underlying issue through the Reliability Standards development process 
without mandating a specific change to PRC-023-1.\25\ Consequently, 
consistent with Order No. 693, we clarify that where the Final Rule 
identifies a concern and offers a specific approach to address that 
concern, we will consider an equivalent alternative approach provided 
that the ERO demonstrates that the alternative will adequately address 
the Commission's underlying concern or goal as efficiently and 
effectively as the Commission's proposal.\26\
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    \24\ Id. P 186.
    \25\ Id.
    \26\ Id.
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    19. Consistent with section 215 of the FPA, our regulations, and 
Order No. 693, any modification to a Reliability Standard, including a 
modification that addresses a Commission directive, must be developed 
and fully vetted through NERC's Reliability Standards development 
process.\27\
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    \27\ Id. P 187.
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C. Applicability

    20. As proposed by NERC, PRC-023-1 does not apply to any facility 
operated or connected between 100 kV and 200 kV unless the relevant 
planning coordinator designates the facility as ``critical'' to the 
reliability of the bulk electric system. In the NOPR, the

[[Page 16918]]

Commission described this as an ``add in'' approach to 
applicability.\28\
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    \28\ NOPR, FERC Stats. & Regs. ] 32,642 at P 40.
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    21. Requirement R3 of PRC-023-1 directs planning coordinators to 
determine which 100 kV-200 kV facilities are critical to the 
reliability of the bulk electric system, and therefore subject to the 
Reliability Standard; it does not, however, define ``critical to the 
reliability of the bulk electric system'' or provide planning 
coordinators with a test to identify critical facilities.
1. NOPR Proposal
    22. In the NOPR, the Commission stated that it expects planning 
coordinators to use a process to carry out Requirement R3 that is 
consistent across regions and robust enough to identify all facilities 
that should be subject to PRC-023-1. The Commission expressed concern 
that, based on the information in NERC's petition, the ``add in'' 
approach proposed by NERC would fail to meet these expectations.
    23. The Commission explained that since approximately 85 percent of 
circuit miles of electric transmission are operated at or below 253 kV, 
the ``add in'' approach could, at the outset, effectively exempt from 
the Reliability Standard's requirements a large percentage of 
facilities that should otherwise be subject to the Standard. The 
Commission also cited a letter from NERC to industry stakeholders 
discussing the results of an ``add in'' approach in the context of 
industry's self-identification of Critical Cyber Assets. According to 
the Commission, the letter was an acknowledgement from NERC that the 
``add in'' approach failed to produce a comprehensive list of Critical 
Cyber Assets.\29\ The Commission further observed that NERC failed to 
provide a technical basis for the ``add in'' approach, and did not 
support its claim that expanded application of PRC-023-1 would double 
implementation costs and distract industry resources from more 
important areas. The Commission added that PRC-023-1 was developed to 
prevent cascading outages, and that no area has a greater impact on the 
reliability of the bulk electric system than the prevention of 
cascading outages.
---------------------------------------------------------------------------

    \29\ Id.
---------------------------------------------------------------------------

    24. The Commission emphasized that PRC-023-1 must apply to relay 
settings on all critical facilities for it to achieve its intended 
reliability objective.\30\ In order to meet this goal, the Commission 
stated that the process for identifying critical 100 kV-200 kV 
facilities must include the same system simulations and assessments as 
the Transmission Planning (TPL) Reliability Standards for reliable 
operation for all categories of contingencies used in transmission 
planning for all operating conditions. The Commission also stated that 
it expects a comprehensive review to identify nearly every 100 kV-200 
kV facility as a critical facility. In light of this expectation, and 
coupled with its concern about the ``add in'' approach, the Commission 
proposed to direct the ERO to adopt a ``rule out'' approach to 
applicability; that is, to modify PRC-023-1 so that it applies to relay 
settings on all 100 kV-200 kV facilities, with the possibility of case-
by-case exceptions for facilities that are not critical to the 
reliability of the bulk electric system and demonstrably would not 
result in cascading outages, instability, uncontrolled separation, 
violation of facility ratings, or interruption of firm transmission 
service.\31\
---------------------------------------------------------------------------

    \30\ Id. P 42.
    \31\ Id. P 43.
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    25. Finally, the Commission proposed to direct the ERO to adopt an 
``add in'' approach to sub-100 kV facilities that Regional Entities 
have identified as critical to the reliability of the bulk electric 
system.\32\ The Commission explained that owners and operators of such 
facilities are defined as transmission owners/operators for the 
purposes of NERC's Compliance Registry,\33\ and that sub-100 kV 
facilities can be included in regional definitions of the bulk electric 
system.\34\ The Commission also stated that NERC failed to provide a 
sufficient technical record to justify excluding such facilities from 
the scope of the Reliability Standard.
---------------------------------------------------------------------------

    \32\ Id. P 45.
    \33\ NERC's Compliance Registry is a listing of organizations 
subject to compliance with mandatory Reliability Standards. See NERC 
Rules of Procedure, Section 500. NERC's Statement of Compliance 
Registry Criteria, which sets forth thresholds for registration, 
defines ``transmission owner/operator'' as:
    III.d.1 An entity that owns or operates an integrated 
transmission element associated with the bulk power system 100 kV 
and above, or lower voltage as defined by the Regional Entity 
necessary to provide for the reliable operation of the 
interconnected transmission grid; or
    III.d.2 An entity that owns/operates a transmission element 
below 100 kV associated with a facility that is included on a 
critical facilities list defined by the Regional Entity.
    See NERC Statement of Compliance Registry Criteria at 9.
    \34\ NERC defines the bulk electric system as follows:
    As defined by the Regional Reliability Organization, the 
electrical generation resources, transmission lines, 
interconnections with neighboring systems, and associated equipment, 
generally operated at voltages of 100 kV or higher. Radial 
transmission facilities serving only load with one transmission 
source are generally not included in this definition.
    See NERC Glossary of Terms Used in Reliability Standards at 2.
---------------------------------------------------------------------------

2. Comments
    26. In response to the NOPR, the Commission received comments 
addressing its remarks about the test that planning coordinators must 
use to implement Requirement R3 and its proposals to direct the ERO to 
adopt the ``rule out'' approach for 100 kV-200 kV facilities and the 
``add in'' approach for sub-100 kV facilities.
a. Comments on the Test That Planning Coordinators Must Use To 
Implement Requirement R3
    27. Commenters generally agree with the Commission that the process 
for identifying critical facilities pursuant to Requirement R3 should 
include the same simulation and assessments required by the TPL 
Reliability Standards for all operating conditions. However, commenters 
disagree with the Commission's expectation that planning coordinators 
will identify nearly every 100 kV-200 kV facility as a critical 
facility. For example, Duke reports that it has applied the existing 
TPL standards to its Midwest and Carolina systems and has not 
identified any sub-200 kV facility as a critical facility (i.e., there 
have been no showings that the loss of any such facilities could result 
in cascading outages, instability, or uncontrolled separation). Other 
commenters maintain that the Commission's expectation is not supported 
by any technical evidence and depends on a circular definition between 
``above 100 kV'' and ``critical to the reliability of the bulk electric 
system.'' \35\
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    \35\ See, e.g., Basin, Exelon, and WECC.
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    28. NERC recognizes the need for consistent criteria across North 
America for identifying critical 100 kV-200 kV facilities and proposes 
to work through industry to develop it.\36\ Although NERC did not 
propose a test in PRC-023-1, in its comments it did provide the 
suggestions for identifying operationally significant 100 kV-200 kV 
facilities that the NERC System Protection and Control Task Force 
provided to Regional Entities in 2004 and 2005 during the voluntary 
Beyond Zone 3 relay review and mitigation program.\37\ During that 
program, NERC suggested that Regional Entities identify:
---------------------------------------------------------------------------

    \36\ NERC Comments at 12.
    \37\ For a discussion of the Beyond Zone 3 relay review and 
mitigation program, see infra P 34.
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    All circuits that are elements of flowgates[\38\] in the Eastern 
Interconnection,

[[Page 16919]]

Commercially Significant Constraints in the Texas Interconnection, 
or Rated Paths in the Western Interconnection. This includes both 
the monitored and outage element for OTDF [Outage Transfer 
Distribution Factor] sets.[\39\]
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    \38\ A ``flowgate'' is a single or group of transmission 
elements intended to model MW flow impact relating to transmission 
limitations and transmission service outage. See Final Black Report 
at 214. Flowgates are operationally significant for the purpose of 
ensuring desirable system performance because an actual outage would 
present the modeled physical limitations on the bulk electric 
system.
    \39\ In the post-contingency configuration of a system under 
study, Outage Transfer Distribution Factor refers to the measure of 
the responsiveness or change (expressed in percent) in electrical 
loadings on transmission system facilities due to a change in 
electric power transfer from one area to another with one or more 
system facilities removed from service.
---------------------------------------------------------------------------

    All circuits that are elements of system operating limits (SOLs) 
and interconnection reliability operating limits (IROLs), including 
both monitored and outage elements.
    All circuits that are directly related to off-site power supply 
to nuclear plants. Any circuit whose outage causes unacceptable 
voltages on the off-site power bus at a nuclear plant must be 
included, regardless of its proximity to the plant.
    All circuits of the first 5 limiting elements (monitored and 
outaged elements) for transfer interfaces[\40\] determined by 
regional and interregional transmission reliability studies. If 
fewer than 5 limiting elements are found before reaching studied 
transfers, all should be listed.
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    \40\ An ``interface'' is the specific set of transmission 
elements between two areas or between two areas comprising one or 
more electrical systems. See Final Blackout Report at 215. An 
interface is operationally significant for the purpose of ensuring 
desirable system performance because an outage of an interface would 
affect IROLs.
---------------------------------------------------------------------------

    Other circuits determined and agreed to by the reliability 
authority/coordinator and the Regional Reliability Organizations.

    29. In its comments, APPA proposes that the Commission direct NERC 
to develop a process whereby each region can develop a specific 
methodology to ensure consistent, verifiable identification of critical 
facilities.
b. Comments on the ``Rule Out'' Approach
    30. Commenters unanimously oppose the ``rule out'' approach. In 
general, they argue that it is unnecessary, extremely costly, and 
potentially detrimental to reliability.
    31. NERC, EEI, and WECC argue that the cascade of 138 kV lines that 
occurred during the August 2003 blackout would not have occurred if the 
345 kV lines in their vicinity had not tripped, and that the 345 kV 
lines would not have tripped if PRC-023-1 had been in effect prior to 
the blackout.\41\ EEI, PG&E, and SRP add that whenever a facility 
between 100 kV and 200 kV trips on load, it is almost always because of 
preceding faults at higher voltages.
---------------------------------------------------------------------------

    \41\ See, e.g., NERC Comments at 10, 16.
---------------------------------------------------------------------------

    32. Some commenters argue that the majority of facilities between 
100 kV and 200 kV are not critical to the reliability of the bulk 
electric system and are unlikely to contribute to cascading outages at 
higher voltages. APPA, EEI, and WECC state that most wide-area bulk 
power transfers flow on high voltage facilities, while most sub-200 kV 
facilities support local distribution service.\42\ SRP asserts that a 
malfunction on a 100 kV-200 kV line typically causes an outage only for 
the load connected to the faulted part of the line, leaving the rest of 
the line unaffected; PG&E makes the related claim that the tripping of 
a 100 kV-200 kV facility generally has a low impact on the reliability 
of higher voltage systems, even when the two systems run in parallel. 
APPA argues that cascading outages at higher voltages are unlikely to 
be arrested by relay action at lower voltages. EEI adds that many 100 
kV-200 kV facilities are designed to support local distribution service 
and their related protection systems are set to ensure separation, 
including load shedding, if disturbances or system events take place. 
EEI asserts that these systems ensure ``controlled separation'' that, 
by definition, does not involve the Bulk-Power System.
---------------------------------------------------------------------------

    \42\ SRP and Y-WEA emphasize that this is especially true in the 
western interconnection, where sub-200 kV facilities are generally 
used as localized means for distributing electricity to moderately 
sized and geographically distant load centers. See also 
ElectriCities and NWCP.
---------------------------------------------------------------------------

    33. Commenters also argue that the ``rule out'' approach is a 
costly and inefficient use of limited industry resources that will 
place an unreasonable burden on small entities and require utilities to 
incur unnecessary upfront costs, forego other important initiatives, 
and direct money and personnel away from the work necessary to ensure 
the day-to-day reliability of the bulk electric system.
    34. NERC states that it modeled PRC-023-1 on two post-blackout 
relay review and mitigation programs (the Zone 3 Review and Beyond Zone 
3 Review) that focused primarily on facilities operated at or above 200 
kV, and that these programs give it a basis for concluding that the 
costs of the ``rule out'' approach are extremely high.\43\ NERC reports 
that these programs took over three years to complete, required close 
to 150,000 hours of labor, cost almost $18 million, and resulted in 
mitigation costs (equipment change-outs or additions) of approximately 
$65 million, or $111,500 per terminal. Based on a survey of industry 
conducted after the NOPR, NERC estimates that a review and mitigation 
program for all facilities between 100 kV and 200 kV would far exceed 
these costs in time and money. NERC estimates that such a program would 
entail review of approximately 53,000 terminals, require close to 
340,000 hours of labor, and cost almost $41 million.\44\ Based on the 
results of the previous review programs, NERC estimates that at least 
11,400 terminals could be out-of-compliance and that mitigation could 
take between 5 and 10 years and cost approximately $590 million.\45\ In 
contrast, NERC estimates that the ``add in'' approach would entail 
review of only 2,400 terminals and require mitigation for approximately 
500, roughly 240 of which would require equipment replacement.\46\
---------------------------------------------------------------------------

    \43\ The Zone 3 Review examined 10,914 terminals operating at or 
above 200 kV. The Beyond Zone 3 Review examined 12,273 terminals 
operating at or above 200 kV and operationally significant terminals 
operating between 100 kV and 200 kV. NERC Comments at 9-16.
    \44\ Id. at 13-14. NERC adds that 114 transmission owners 
operating 100 kV-200 kV lines responded to the survey.
    \45\ Id. at 14.
    \46\ Id. at 15.
---------------------------------------------------------------------------

    35. Some commenters argue that the ``rule out'' approach may 
adversely affect reliability. Exelon is concerned that the ``rule out'' 
approach may unintentionally result in the over-inclusion of facilities 
subject to PRC-023-1. Exelon believes that such over-inclusion will 
take a known and successful backup protection scheme and make it less 
effective. Exelon explains that over-inclusion will increase the risk 
of certain instances of backup relaying not tripping when it should, 
thus allowing what would otherwise be a minor disturbance to expand 
unnecessarily.\47\ Consumers Energy and Entergy argue that the ``rule 
out'' approach will require entities to divert scarce resources from 
other duties that are essential to reliability, thereby adversely 
affecting reliability. Basin argues that the complexity of integrating 
PRC-023-1 with other Reliability Standards for lower voltage lines will 
divert personnel from more important aspects of the Reliability 
Standards and adversely affect reliability.
---------------------------------------------------------------------------

    \47\ See also Ameren at 8.
---------------------------------------------------------------------------

    36. In addition to these arguments, commenters oppose the ``rule 
out'' approach on the grounds that it: (1) Fails to give due weight to 
the technical expertise of the ERO, as required by section 215(d)(2) of 
the FPA; (2) violates Order No. 693 because it prescribes a specific 
change that will dictate the content of the modified Reliability

[[Page 16920]]

Standard; \48\ (3) is inconsistent with the Commission's statements in 
Order No. 672 about the cost of Reliability Standards; \49\ (4) rests 
on the unsupported assumption that planning coordinators will fail to 
produce a comprehensive list of critical facilities; and (5) 
mischaracterizes NERC's letter expressing concern about the use of an 
``add in'' approach in the Critical Cyber Assets survey.\50\
---------------------------------------------------------------------------

    \48\ See e.g., TAPS, APPA, EEI, Ameren, Manitoba Hydro, Georgia 
Transmission, Tri-State, CRC, EEI, APPA, Ameren, TANC, Fayetteville 
Public Works Commission, and LES.
    \49\ In Order No. 672, the Commission stated that ``[a] proposed 
Reliability Standard does not necessarily have to reflect the 
optimal method, or `best practice,' for achieving its reliability 
goal without regard to implementation cost. * * * [but] should[,] 
however[,] achieve its reliability goal effectively and 
efficiently;'' Rules Concerning Certification of the Electric 
Reliability Organization; and Procedures for the Establishment, 
Approval, and Enforcement of Electric Reliability Standards, Order 
No. 672, FERC Stats. & Regs. ] 31,204, at P 328, order on reh'g, 
Order No. 672-A, FERC Stats. & Regs. ] 31,212 (2006).
    \50\ See e.g., Exelon, PG&E, EEI, Basin, and TAPS.
---------------------------------------------------------------------------

    37. In the event that the Commission adopts the ``rule out'' 
approach, commenters argue that the Commission should immediately 
confirm the following exclusions: (1) Facilities that are not part of a 
defined and routinely monitored flowgate; (2) radial transmission 
lines, because they are specifically excluded from the bulk electric 
system and are not critical to the reliability of the bulk electric 
system; \51\ and (3) Category D Contingencies, because they involve the 
loss of multiple transmission facilities caused by the outage of 
transmission facilities other than those relevant to the Reliability 
Standard.
---------------------------------------------------------------------------

    \51\ See e.g., ElectriCities, NWCP, Palo Alto, PSEG Companies, 
Pacific Northwest State Commissions, Y-WEA, and Filing Cooperatives.
---------------------------------------------------------------------------

    38. Commenters also disagree with what they describe as the 
Commission's 5-part test for case-by-case exceptions from the ``rule 
out'' approach, that is, its proposal to permit exceptions for 
facilities that demonstrably would not result in: (1) Cascading 
outages; (2) instability; (3) uncontrolled separation; (4) violation of 
facility ratings; or (5) interruption of firm transmission service.
    39. At the outset, commenters assert that they do not understand 
the relationship between the 5-part test for exceptions from the ``rule 
out'' approach and the Commission's insistence that the ``add in'' 
process must include the same simulations and assessments as the TPL 
Reliability Standards. Commenters are unsure whether the 5-part test is 
in addition to, or in lieu of, the TPL assessments.
    40. Commenters also challenge the substance of the 5-part test, 
generally arguing that it requires more than a showing that a facility 
is unlikely to contribute to cascading thermal outages and introduces 
more rigorous requirements than those in the TPL Reliability Standards. 
Specifically, APPA, Duke, Exelon, and TAPS argue that interruption of 
firm transmission service and violation of facility ratings do not 
belong as elements of the test because: (1) They do not result in 
instability, uncontrolled separation, or cascading failures, and are 
absent from the definition of ``Reliable Operation'' in section 215 of 
the FPA; \52\ (2) avoiding an interruption of firm transmission service 
is a business issue; (3) a requirement specifying that the loss of a 
138 kV line cannot result in interruption of local load goes beyond the 
requirements of existing Reliability Standards; (4) the loss of a 138 
kV line does not show a loss of bulk electric system reliability; and 
(5) ``violation of facility ratings'' is unduly vague and over-broad 
because it is not restricted to bulk electric system facilities other 
than the facility in question and is not focused on violation of 
emergency ratings caused by an outage of the facility in question.
---------------------------------------------------------------------------

    \52\ Section 215 defines ``Reliable Operation'' as ``operating 
the elements of the bulk-power system within equipment and electric 
system thermal, voltage, and stability limits so that instability, 
uncontrolled separation, or cascading failures of such system will 
not occur as a result of a sudden disturbance, including a 
cybersecurity incident, or unanticipated failure of system 
elements.'' 16 U.S.C. 824o(a)(4).
---------------------------------------------------------------------------

    41. Commenters also argue that NERC should develop the test for 
exclusions and that there should be some mechanism for entities to 
challenge criticality determinations. For example, APPA argues that the 
Regional Entity should establish a process for entities to challenge 
criticality determinations.
c. Comments on Proposal To Include Sub-100 kV Facilities
    42. Commenters also address the Commission's proposal to direct the 
ERO to adopt an ``add in'' approach to sub-100 kV facilities, with most 
objecting to what they perceive as the Commission's view of the 
Compliance Registry.\53\ NERC argues that the Commission 
mischaracterized the nature and purpose of the Compliance Registry by 
suggesting that entities on the Registry must comply with all 
Reliability Standards for all of their facilities.\54\ NERC explains 
that the Compliance Registry does not specify which entities must 
comply with any particular Reliability Standard, but that each 
individual Standard specifies the entities and the facilities that are 
subject to it. TAPS and APPA assert that a facility may be ``critical'' 
for the purpose of inclusion on the Compliance Registry, but not 
``operationally significant'' for the purpose of avoiding cascading 
thermal outages. For example, TAPS states that a sub-100 kV line that 
connects to a black start unit and is designated as part of a 
transmission operator's restoration plan would be deemed critical for 
Compliance Registry purposes, but may not be operationally significant 
for purposes of thermal cascading outages.\55\
---------------------------------------------------------------------------

    \53\ See e.g., NERC, EEI, TAPS, TANC, Ontario Generation, 
SWTDUG, and APPA.
    \54\ See also TANC and Ontario Generation.
    \55\ TAPS at 16; see also APPA at 28.
---------------------------------------------------------------------------

    43. Several commenters request that the Commission confirm their 
understanding of what is required if the Commission adopts its 
proposal. ERCOT and TAPS request confirmation that the Reliability 
Standard will apply only to those sub-100 kV facilities that are 
already in the Compliance Registry, and that future registration will 
be subject to a case-by-case demonstration of criticality. Likewise, 
SWTDUG is concerned that the Commission's proposal will require non-
registered public power entities with sub-100 kV facilities to become 
Registered Entities. ERCOT also requests confirmation that the only 
required revision to the Reliability Standard would be the addition of 
sub-100 kV facilities to the applicability section. ISO New England 
requests confirmation that the Commission does not intend to create an 
enforceable obligation against Regional Entities by directing them to 
undertake--solely for the purpose of compliance with PRC-023-1--a 
process to determine which sub-100 kV facilities are critical to the 
reliability of the bulk electric system. ISO New England asserts that 
NERC has already delegated to Regional Entities the role of designating 
critical sub-100 kV facilities as part of the Compliance Registry 
process.\56\ ISO New England seeks clarification that the Commission's 
proposal merely requires the addition of a cross-reference to previous 
designations of criticality made pursuant to the Compliance Registry 
process.
---------------------------------------------------------------------------

    \56\ ISO New England at 3.
---------------------------------------------------------------------------

    44. ITC, IRC, and IESO/Hydro One support the Commission's proposal. 
These commenters argue that a proactive approach should be used to 
identify any facilities critical to the reliability of the bulk 
electric system.
    45. NERC and EEI oppose the Commission's proposal; however, both

[[Page 16921]]

concede that it may have merit and should be studied through the 
Reliability Standards development process.\57\ SWTDUG and TAPS oppose 
the Commission's proposal and argue that the Final Blackout Report does 
not support extending the Reliability Standard to relay settings on 
sub-100 kV facilities. TAPS maintains that the Commission must give 
``due weight'' to NERC's exclusion of sub-100 kV facilities.
---------------------------------------------------------------------------

    \57\ NERC Comments at 18-19; EEI at 17-18.
---------------------------------------------------------------------------

    46. EPSA argues that the Commission's proposal lacks technical 
support and fails to identify a specific reliability gap. EPSA contends 
that the Commission should use ``Reliability Engineering'' to determine 
if its project has a technical basis. EEI argues that few sub-100 kV 
facilities are critical to the reliability of the bulk electric system. 
EEI states that because it usually requires multiple 69 kV lines to 
replace one 138 kV line, it is highly unlikely that sub-100 kV 
facilities will cause a major cascade. EEI asserts that it is much more 
likely that sub-100 kV facilities will trip to end a cascade, as 
occurred during the August 2003 blackout.
3. Commission Determination
    47. As discussed more fully below, we decline to direct the ERO to 
adopt the ``rule out'' approach for 100 kV-200 kV facilities. However, 
we adopt the NOPR proposal and direct the ERO to modify PRC-023-1 to 
apply an ``add in'' approach to certain sub-100 kV facilities that 
Regional Entities have already identified or will identify in the 
future as critical facilities for the purposes the Compliance 
Registry.\58\ Finally, we direct the ERO to modify Requirement R3 of 
the Reliability Standard to include the test that planning coordinators 
must use to identify sub-200 kV facilities that are critical to the 
reliability of the bulk electric system.
---------------------------------------------------------------------------

    \58\ Examples of such facilities include black start generation 
and the ``cranking path'' from the generators to the bulk electric 
system.
---------------------------------------------------------------------------

a. ``Rule Out'' Approach
    48. We will not direct the ERO to adopt the ``rule out'' approach. 
After further consideration, we conclude that our concerns about the 
``add in'' approach can be addressed by directing the ERO to modify 
Requirement R3 of the Reliability Standard to specify a comprehensive 
and rigorous test that all planning coordinators must use to identify 
all critical facilities.
    49. In the NOPR, the Commission explained that PRC-023-1 must apply 
to relay settings on all critical facilities between 100 kV and 200 kV 
for it to achieve its intended reliability objective. The Commission 
also stated that planning coordinators must use a process to carry out 
Requirement R3 that is consistent across regions and robust enough to 
identify all facilities that should be subject to the Reliability 
Standard. The Commission expressed concern, however, that NERC's ``add 
in'' approach could effectively exempt from the Reliability Standard's 
Requirements a large percentage of facilities that should otherwise be 
subject to the Standard. Since NERC did not propose any test for the 
Commission to consider, the Commission proposed the ``rule out'' 
approach to ensure that planning coordinators identify all critical 
facilities between 100 kV and 200 kV.
    50. After reflecting on the rationale behind the ``rule out'' 
approach--namely, the goal of ensuring that planning coordinators 
identify all critical facilities between 100 kV and 200 kV--and 
considering the comments, we conclude that, from a reliability 
standpoint, it should not matter whether PRC-023-1 employs an ``add 
in'' approach or a ``rule out'' approach because both approaches should 
ultimately result in the same list of critical facilities. In other 
words, given a uniform and robust test, the facilities that would be 
``added in'' under an ``add in'' approach should be the same as the 
facilities that would remain subject to the Reliability Standard after 
non-critical facilities are ruled out under the ``rule out'' approach. 
Instead of concerning ourselves with the merits of an ``add in'' or 
``rule out'' approach, the Commission will focus on the test 
methodology that a planning coordinator uses to either ``add in'' or 
``rule out'' a facility. If that test is lacking, PRC-023-1's 
reliability objective will not be achieved regardless of whether an 
``add in'' approach or a ``rule out'' approach is adopted. 
Consequently, we decline to adopt the NOPR proposal and will not 
require the ERO to adopt the ``rule out'' approach. Instead, as 
discussed below, we direct the ERO to modify Requirement R3 of the 
Reliability Standard to specify the test that planning coordinators 
must use to identify all critical facilities.
    51. In light of our decision, we do not need to address commenters' 
objections to the ``rule